Hundreds of people packed a Rome church today to pay their last respects to an Italian intelligence officer shot and killed by American troops in Iraq while escorting a freed hostage.

The Italian prime minister, Silvio Berlusconi, the president, Carlo Azeglio Ciampi, and the US ambassador, Mel Sembler, were among the high-ranking officials attending the state funeral of Nicola Calipari in the Santa Maria degli Angeli church.

Crowds lined the streets and an honour guard slowly carried the coffin, draped with an Italian flag, into the church, where mourners who packed the pews stood to applaud. In the front row, Mr Calipari's relatives gripped each other's hands and dabbed away tears.

"He died as a hero, and I cannot forget he had also helped to free us," Maurizio Agliana, one of four Italian security guards kidnapped in Iraq last April, told the crowd.

The 90-minute funeral was broadcast live on several TV stations, including Vatican television, which usually only broadcasts Vatican ceremonies.

The funeral came after the body of Mr Calipari, who was to be awarded a gold medal of valour for heroism, lay in state at Rome's Vittoriano monument. Tens of thousands of people streamed past after the body was returned from Iraq on Saturday night.

An autopsy was performed yesterday and the Italian news agency Ansa quoted doctors as saying he was struck in the temple by a single round and died instantly.

The Bush administration said this afternoon that claims by the freed hostage, Giuliana Sgrena, that her car had been deliberately attacked were "absurd". White House press secretary Scott McClellan said the car was travelling on one of the most dangerous roads in Iraq when it was fired upon.

Mr McClellan said: "It's absurd to make any such suggestion, that our men and women in uniform would target individual citizens."

Ms Sgrena, a journalist who was abducted on February 4 in Baghdad, is recovering in a Rome hospital from a shrapnel wound to the shoulder.

Mr Calipari was killed when US troops at a checkpoint fired at their vehicle on Friday as they headed to the airport shortly after Ms Sgrena's release. Ms Sgrena said Mr Calipari died shielding her.

"I believe, but it's only a hypothesis, that the happy ending to the negotiations must have been irksome," she told the Corriere della Sera. "The Americans are against this type of operation. For them, war is war. Human life doesn't count for much."

Ms Sgrena has rejected the US military's account of the shooting, claiming instead that American soldiers gave no warning before they opened fire. The White House called it a "horrific accident" and promised a full investigation.

The shooting has fuelled anti-American sentiment in Italy, where a majority of people opposed the war in Iraq and Mr Berlusconi's decision to send 3,000 troops after Saddam Hussein's downfall.

Neither Italian nor US officials gave details about how authorities won Ms Sgrena's release after a month in captivity.

But agriculture minister Giovanni Alemanno was quoted as saying it was "very probable" a ransom was paid. US officials have cautioned against ransoms, saying they encourage further kidnappings.

Ms Sgrena, who works for the communist newspaper Il Manifesto - a fierce opponent of the war and a frequent critic of US policy - said she knew nothing about a ransom.

· US troops in Iraq faced a second embarrassment today after it emerged a Bulgarian soldier killed last week was likely to have been shot by coalition forces.

"The result (of the investigation) gives us enough grounds to believe the death of Private Gardi Gardev was caused by friendly fire," the Bulgarian defence minister, Nikolai Svinarov, said today. Pte Gardev was part of a patrol hit by a hail of bullets which came from the direction of a US army post on Friday, he added.

Pte Gardev's funeral will take place tomorrow in his home village of Dolno Sahrane, in central Bulgaria.